Bitcoin Mining Difficulty Has Gone Down In The Latest Adjustment
On-chain data shows that Bitcoin mining difficulty decreased by more than 4% during the latest network adjustment.
The latest network adjustment saw Bitcoin mining difficulty decrease by over 4%. This adjustment aims to regulate the asset's inflation by controlling the rate at which miners generate new blocks.
The "mining difficulty" metric gauges the effort required by miners to uncover blocks on the Bitcoin network. Around every two weeks, the BTC blockchain undergoes an automated adjustment that alters this indicator.
To assess whether this change is beneficial or detrimental, it's crucial to understand the mining difficulty's purpose. In essence, the difficulty serves as a measure to regulate the asset's inflation.
The sole method to expand the BTC supply entails mining new blocks and collecting a block subsidy in return. Given that the block subsidy has a set value, the only factor influencing the cryptocurrency's supply growth is the speed at which miners hash new blocks.
Therefore, to regulate the asset's inflation, this rate must be constrained. To achieve this, Satoshi, the coin's inventor, devised the concept of mining difficulty.
When miners collectively increase their computational power (also known as the hashrate), they naturally become faster at the mining process and, as a result, receive block subsidies at a quicker rate.
However, this is not something that the BTC network desires, so it raises its difficulty as a measure to slow the miners back down just enough to align with the desired speed, which is a block every ten minutes.
Of course, when miners lose hashrate, the difficulty drops, allowing miners to continue processing blocks at the usual pace even with the lower computational power.
In fact, it appears that this latter type of change occurred during the latest adjustment, as the chart below suggests.
During this latest downward adjustment, the BTC network's difficulty decreased by over 4%. The graph shows that the adjustment before this one was a sharp positive change, suggesting that the chain had been reacting to the miners becoming significantly faster at their task.
The 7-day average mining hashrate chart would confirm this, as its value had shot up to a new all-time high (ATH) before this difficulty increased.
One implication of the difficulty is that when new miners join the Bitcoin network, the revenue share of all miners involved gets smaller since the block subsidy remains the same as before the new miners came in.
The large difficulty spike earlier had naturally put miners under pressure, a factor behind the decline that the hashrate has seen since its ATH. With the difficulty of seeing a negative adjustment now, it's possible that at least some miners would feel improved conditions.
BTC Price
At the time of writing, Bitcoin is trading at around $58,500, down more than 2% over the past week.
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